Merchant Funding

Joseph Stiglitz argues that markets in which information is less than perfect can work better with government intervention. You continually emphasize the information problem faced by borrowers in the home loan markets. Hence, if you agree with Stiglitz, you should be a strong interventionist, yet most of what you write is critical of government intervention. [...]

The former Countrywide Financial Corp. gave preferential loans to more than three dozen employees of Fannie Mae while the two giant housing enterprises were locked in an expanding, multi-billion dollar business relationship in subprime mortgages, documents show. Discounted mortgages written by Countrywide, once the nation’s largest subprime lender, were granted to a far wider group [...]

So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes. Credit ratings agency Fitch Ratings projects that about two-thirds of borrowers with permanent modifications under the Obama plan will default again [...]